Foreign Relations of the United States, 1969–1976, Volume XXIX, Eastern Europe; Eastern Mediterranean, 1969–1972

24. Memorandum From Helmut Sonnenfeldt of the National Security Council Staff to the Presidentʼs Assistant for National Security Affairs (Kissinger)¹

Washington, October 18, 1972.

SUBJECT

• Relations with Eastern Europe

In the wake of the Moscow Summit, the East European countries are hastening to settle long-standing economic issues with us, indicating their willingness to conclude consular and Science and Technology Agreements, and showing great interest in economic concessions such as MFN. They obviously have Soviet approval for their approaches. Our economic negotiating package with the USSR serves as a model and a cover. The rush is on, with the Poles and Hungarians in the forefront and even the Czechoslovaks and Bulgarians proposing negotiations.

Secretary Rogers has been responsive to such approaches. As a result of discussions held during his trip to Budapest last July, the Hungarians came here and negotiated a claims settlement (see memo of October 13, Log 7335 at Tab C).² At his October meeting with the Czechoslovak Foreign Minister, he suggested that we are ready to negotiate on claims, an S&T agreement, and a consular convention.³ (We may expect soon the Secretaryʼs formal proposal to begin these negotiations.) State has also told the Bulgarians that we would welcome a high-ranking economic delegation. Our economic relationships with Poland and Romania are, of course, already well developed but several issues are currently hanging fire: We have supported MFN legislation for the Romanians and the debt rollover which the President promised the Poles for instance. State and Commerce are now also giving thought to concluding commercial agreements, mainly of a facilitative nature but also perhaps embodying MFN clauses, with all the East European countries.

You will find an overview of our current economic and other relations with the East European countries at Tab D. It shows that there are a number of agreements which we could negotiate soon if we wish.

To my mind, the State Departmentʼs way of dealing with the East Europeansʼ approaches lacks coherence. If we proceed ad hoc, as we seem to be starting to do, we run several risks:

• —that the pace and scope of our relations with the East Europeans will be determined more by them than us;
• —that we may lose some of the benefits of reciprocity;
• —that differentiation in our policy disappears between those countries who have been helpful to us when it was dangerous to do so, such as Romania and Yugoslavia, and the latecomers; and
• —that the undesirable impression is given that our policies toward individual East European countries are only a function of our rapprochement with the Soviet Union.

If you agree, there are two things to do now:

1. Request the Secretary of State to refrain for the moment from opening new negotiations with the East European countries until we have worked out a comprehensive plan.

A vehicle is at hand to accomplish this: The Secretary has sent the President a memorandum with his proposal to begin negotiations with Czechoslovakia (Log 7333 at Tab B).⁴ If you agree, you should (a) ask the Secretary to delay these negotiations until we have developed a coherent approach for all of Eastern Europe; and (b) notify the President of this. These recommendations are included in my separate memorandum to you covering the Secretaryʼs report on Czechoslovakia (also at Tab B).⁵

Recommendation

That you approve my recommendations on Secretary Rogersʼ memorandum on Czechoslovakia (Tab B).

2. Request that the agencies undertake an urgent study of the issues involved in normalizing our economic relations with the Eastern European countries. The objective should be to develop a political and phased plan for our negotiations with these countries. Since initial negotiations are likely to be on economic matters, Peter Flanigan will want to participate in directing this study be carried out.

The draft NSSM/CIEPSM, which Flanigan has approved, would ask that the Secretary of State organize such a study and submit it along with his policy recommendations by December 1.

Recommendation

That, with Peter Flanigan, you sign the proposed NSSM/CIEPSM at Tab A.⁶ Bob Hormats concurs, as does Dick Kennedy.

Comments

The outcome of our current economic negotiations with the Soviets will set certain parameters for our policy decisions regarding Eastern Europe. The NSSM/CIEPSM response will then permit us within that framework to formulate a comprehensive policy for all aspects, including the economic, of our relations with the individual East European countries.

Note that the proposed NSSM/CIEPSM requests that the GDR and Albania be studied along with the other countries. Policy decisions on the GDR are, as you know, pending separately in the response to NSSM 146.⁷ We have not addressed Albania in the NSSM context so far. This is a low-key way to begin.

Tab D

OUTSTANDING ECONOMIC AND OTHER ISSUES WITH THE EAST EUROPEAN COUNTRIES—SURVEY

Romania

Economic: MFN—Administration supports.⁸ No Congressional action yet.

• Agricultural Credits—Romanians want PL 480 type sales. We increased CCC line to $61 million last summer, but indicated no PL–480 possible under present legislation.⁹
• Government Loan—We told Romanians last summer we couldnʼt arrange one under our system.¹⁰
• EX–IM—Granted September 1971. First loan made.¹¹
• OPIC—Granted September 1972.
• Private Bonded Indebtedness—Negotiations suspended. Romanians agree to negotiate when MFN received.
• Joint projects in Africa—Romanians have approached us but we were negative.

Other:

• Cultural Exchanges—Both sides want to expand under current Cultural and Scientific Exchanges Agreement. Negotiations begin in November for 1973–74.
• Civil Air Agreement—No interest on either side.

Poland

Economic:

• MFN—Provided in 1960.
• PL–480 Debt Deferral—President promised deferral at two year tranches during Warsaw trip;¹² negotiations interrupted over interest issue.¹³
• Agricultural Credits—Poles have requested new long-term local currency sales agreement last June. We have not replied, but Poles told that there is little hope.
• EX–IM—We have tied it to bond settlement.¹⁴
• Private Bonded Indebtedness—Interim settlement ready for conclusion with Bondholders.¹⁵

Other:

• Science and Technology Agreement—Ready for signature.¹⁶
• Civil Air Agreement—Concluded in July 1972¹⁷ but CAB permit still pending.

Czechoslovakia

Economic:

• MFN—Do not have.
• Claims—Czechs want to settle, link with our holding of Czechoslovak monetary gold, have suggested February 1973 as starting date.¹⁸
• EX–IM—Not eligible.
• Private Bonded Indebtedness—Czechs have refused to negotiate some $2.7 million in outstanding claims.¹⁹
• Blocked Accounts (both ways)—About $5 million.
• Surplus Property Debt—Owed by Czechs in amount of $5 million.

Other:

• Consular Convention—Czechs want to negotiate. State prepared to start in November, 1972.
• S & T Agreement—Czechs want to negotiate, but we want broad, general agreement covering culture as well.
• Consulates—Czechs want a Chicago consulate and will permit us to reopen in Bratislav.

Hungary

Economic:

• MFN—Do not have but indicated interest.
• Claims—Settlement initialled 10/12/72.²⁰
• EX–IM—Donʼt have.
• Private Bonded Indebtedness—Negotiations have begun.

Other:

• Crown of Saint Stephen—We have custody. Hungarians want it; émigrés opposed to return.²¹
• Culture, Science and Technology Exchanges Agreement—We have given a draft. Hungarians plan reply.
• Civil Air Agreement—Concluded June 1972.

Bulgaria

Economic:

• MFN—Do not have, indicated interest.
• Claims—None.
• EX–IM—Donʼt have; Bulgarians have indicated interest in “credits.”²²
• Private Bonded Indebtedness—Outstanding claims of $6.5 million.

Other:

• Consular Convention—Bulgarians have for several years delayed reply to our draft.
• Status of Embassy—Harassment by Bulgarians.
• Cultural Exchange—Bulgarians unresponsive until this month; now propose expansion.
• Maritime Agreement—Bulgarians have proposed.
• Arbitration Agreement—Bulgarians have proposed.
• Civil Air Agreement—No interest on either side.

German Democratic Republic

Economic:

• General—We have no agreements with the GDR and it is not eligible for MFN, EX–IM, or CCC credits. It is subject to more stringent export controls than the other East European countries.
• Claims—U.S. claims exist. State Department is compiling updated list of amounts.

Other:

No relations. GDR has evinced some interest in privately-sponsored cultural exchanges.

Albania

Economic:

• General—1926 Commercial Treaty (including MFN)²³ whose validity Albanians wonʼt acknowledge.
• Claims—Since 1946 we have had claims outstanding. We holding Albanian gold.

Other:

No relations. No Albanian interest shown so far. In 1946 we asked for confirmation of several previous agreements: Pre-war extradition, nationality, arbitration, and visa treaties whose validity Albanians wonʼt acknowledge.

Yugoslavia

Economic:

• MFN—Have since before World War II.
• EX–IM—Granted.
• OPIC—Available.
• Financial Claims—None, but Yugoslavia faces a repayment problem on previous credits.
• PL–480 Credits—Potential U.S. sales restricted by Findley Amendment.²⁴

Other:

Civil Air Agreement—No interest in bilateral. U.S. interest in charter agreement.

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files), Box H–194, National Security Study Memoranda, NSSM 163. Confidential. Sent for action. Haig signed the memorandum, indicating that he saw it.
2. Document 129.
3. See Document 91.
4. Document 90.
5. See Document 92.
6. Not attached and not found. Presumably it was a draft of NSSM 163 (Document 25).
7. See Foreign Relations, 1969–1976, volume XL, Germany and Berlin, 1969–1972, Document 341.
8. See Document 208.
9. See Document 193.
10. See Document 214.
11. The administration announced Nixonʼs decision to extend Export-Import Bank facilities to Romania on November 30, 1971. (Telegram 216475 to Bucharest, November 30; National Archives, Nixon Presidential Materials, NSC Files, Box 702, Country Files, Europe, Rumania, Vol. II, 9/69–Jun 70)
12. Regarding Nixonʼs trip to Poland, see Documents 163–166.
13. See Document 173.
14. See Document 170.
15. See Document 173.
16. See Document 175.
17. For the agreement, see 23 UST 4269.
18. See Document 85.
19. See Document 90.
20. See Document 129.
21. See Documents 116 and 126.
22. See Document 75.
23. On the commercial treaty with Albania, see Volume has not been digitized, no volume id available Foreign Relations, 1925, volume I, p. 511.
24. The Findley–Belcher Amendment to the Food for Peace Act (Section 103 (d) (3) of P.L.–480) forbade the sale of agricultural commodities on credit to “any nation which sells or furnishes or permits ships or aircraft under its registry to transport to or from Cuba or North Vietnam… any equipment, materials, or commodities so long as they are governed by a Communist regime.” (80 Stat. 1527)